Stocks are trading as if there’s something brewing under the cover of the indices. This morning, the S&P 500 and other major benchmarks started in the green but have been giving-up ground slowly as the day trades. Much of this is blamable on the Columbus Day holiday, which has the bond markets closed, so traders should expect to see some volatility through the day.
Lately, the market has become more bifurcated, even though we see the major indices continue to pop to new highs. For that reason, we thought today’s three big stock charts would take a look at the technical pictures of Activision Blizzard, Inc. (NASDAQ:ATVI), Netflix, Inc. (NASDAQ:NFLX) and Medtronic plc. Ordinary Shares (NYSE:MDT) as two bears and a bull and a great example of how this market is a stock picker’s game instead of one for an index or sector investor.
Activision Blizzard, Inc. (ATVI)
Video game makers often have a strong holiday season like the retailers because gamers try to buy the best and most popular video games as we head into the year-end. This hasn’t been the case this year, as companies like Activision have not been to spark a buying frenzy for their new games. The technical effect on ATVI shares has been negative and it warns of further declines.
- Despite positive mention in Barron’s over the weekend, Activision shares are trading lower this morning after a downgrade from Cohen. ATVI stock is heavily populated with buy recommendations from analysts marketing it as a “crowded trade” and it is likely to see more downside pressure from downgrades.
- Activision shares broke through their bottom Bollinger Band at the same time that the stock’s momentum trend indicators are moved into bearish territory. This suggests that we’re going to see a volatility sell-off of ATVI shares that will target lower prices.
- Overhead, the 50-day moving average for Activision stock is now transitioning into bearish mode. The last time this happened was about a year ago, when the stock dropped from $43 to $35.
Netflix, Inc. (NFLX)
Last week, I suggested that Netflix was one of the only FANG stocks that was worth a look as the shares appeared ready to take off on a “buy the rumor” rally, and that’s exactly what has happened.
The NFLX stock charts are clear on why it is a hold into its earnings announcement next week.
- After making a bullish bounce from its 50-day, Netflix shares are now crossing above their top Bollinger Band as they move into a volatility rally. NFLX stock averages gains of about 8% when these rallies initiate.
- Buying volume is coming in on the stock, indicating that the “smart money” is grabbing the stock ahead of the earnings announcement. We are likely to see a “sell the news” correction after the report, but with volume this high, we expect to see $200 come in as some support.
- Last week’s break higher took Netflix above their chart resistance of $190, making way for the stock to move higher. Our scan of the charts identifies an average of 12% once these resistance levels are taken-out.
Medtronic Inc. (MDT)
Once a darling of the biotech and medical sector, Medtronic is feeling the pain of being part of a crowded trade.
MDT stock has broken into a long-term bear market and intermediate-term technicals are working against a recovery in the near-term.
- This morning, shares of Medtronic were downgraded by Wells Fargo, putting additional selling pressure on the already bearish trend.
- After pushing higher last week, another short-term rally in MDT shares has failed, leaving the stock in a continued trend of lower highs and lower lows. This trend is magnified by the declining trend of the stock’s 50-day moving average. This is a great example of a stock that is no friend of the trend.
- Medtronic shares are now in their second month of a bear market as the stock is trading below its 20-month moving average. This implies a bearish outlook for the next 6-12 months. In addition, the fact that analysts are now starting to bail on MDT stock suggests more selling on the horizon.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
